Esi Corporation vs M/S Pragati Engineering Works
2022 Latest Caselaw 2304 Kant

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        IN THE HIGH COURT OF KARNATAKA
                DHARWAD BENCH

 DATED THIS THE 14TH DAY OF FEBRUARY, 2022
                         BEFORE
       THE HON'BLE MR. JUSTICE R. NATARAJ

              MFA NO.22063/2010 (ESI)

BETWEEN:

ESI CORPORATION,
REP. BY ITS DEPUTY DIRECTOR,
ESI CORPORATION, SUB-REGIONAL OFFICE,
NOW AT NO. H-42, GROUND FLOOR,
NIKETAN, DOLLARS COLONY, ADJ. NEW CENTRAL
BUS STAND, HUBLI-580 030.
(AS THERE IS NO POST OF ASST. DIRECTOR,
THE ESI CORPORATION IS REP. BY ITS
DEPUTY DIRECTOR)
                                               ... APPELLANT
(BY SHRI VINAY S.KOUJALAGI
 FOR SHRI V.M. SHEELVANT, ADVOCATE)

AND:

M/S. PRAGATI ENGINEERING WORKS,
C-144/442, GOKUL ROAD, HUBLI-580 028,
REP. BY ITS PROPRITOR,
SHRI NEMINATH BHARADWAJ GIGGARI.
                                             ... RESPONDENT
(BY SHRI SURESH S.GUNDI, ADVOCATE)

      THIS MFA IS FILED UNDER SECTION 82(2) OF THE ESI ACT,
1948 AGAINST THE JUDGMENT AND ORDER DATED 21.01.2010,
PASSED IN ESI NO.09/2004 ON THE FILE OF THE EMPLOYEES STATE
INSURANCE COURT, HUBBLI, PARTLY ALLOWING THE ESI
APPLICATION FILED UNDER SECTION 75 OF THE EMPLOYEES STATE
INSURANCE ACT, 1948.

     THIS APPEAL COMING ON FOR FINAL HEARING, THIS DAY, THE
COURT DELIVERED THE FOLLOWING:
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                                JUDGMENT

This appeal is filed under Section 82(2) of the Employees'

State Insurance Act, 1948 (for short "the Act, 1948") by the ESI

Corporation challenging an order dated 21.01.2010 passed by

the ESI Court, Hubballi in ESI Application No.9/2004, by which it

set aside the order passed by the ESI Corporation under Section

45-A of the Act, 1948 claiming contribution of Rs.1,24,240/-.

2. The respondent is an establishment, which is covered

under the provisions of the Act, 1948 and was engaged in the

manufacture of copper sheets. It was also taking up job work

from various parties. On 20.12.2002, the Inspector attached to

the ESI Corporation visited the establishment of respondent and

inspected the cash book, ledgers, challan and other documents

and it was pointed out that the respondents establishment had

paid money towards transportation and conveyance during 2000-

01 and 2001-02 and had failed to contribute to the insurance

fund. The Inspector also observed that the respondent

establishment had received labour charges (henceforth refereed

to as omitted labour charges) in a sum of Rs.13,03,272/- for the

period 2000-01 and Rs.5,15,518/- during 2001-02 on which it

had not paid any contribution. The Inspector thereafter

submitted his survey report. Based upon the survey report, the

Corporation issued a demand dated 03.02.2003 demanding

contribution on the omitted labour charges and fixed personal

hearing on 14.02.2003. The respondent establishment did not

dispute the contribution demanded on the transportation and

conveyance charges and paid up a sum of Rs.1,660/- plus

interest and penalty as applicable. However, insofar as the

contribution on the alleged omitted labour charges, the

respondent establishment submitted a letter stating that on

14.02.2003 he could not attend the personal hearing since the

Hon'ble Prime Minister of India was visiting Hubballi and the

roads in Hubballi were blocked. He therefore sent an intimation

on 17.02.2003 requesting for another date for personal hearing.

This was followed by an order dated 25.04.2003 under Section

45-A of the Act, 1948 demanding contribution of a sum of

Rs.1,24,240/-.

3. This was challenged by the respondents before the

ESI Court at Hubballi in ESI Application No.9/2004. The ESI

Court after considering the contentions urged, held as follows:

"14. The other aspect is concerned, on perusal of ledgers at Ex.A.24 and Ex.A.25 it cannot be denied that the applicant establishment is doing job work by using its employees and for job work it is receiving the amount

from the respective establishments and it is its income. On this income the applicant establishment is not liable to pay the contribution. It is not denied that on the labour charges pertains to their labourers the contribution is already paid and the respondent corporation is now claming this contribution amount on omitted wages. In the opinion of this court by perusal of the records which are produced on the side of the applicant establishment particularly by perusing ledgers at Ex.A.24 and Ex.A.25 it is not omitted wages, but it is the amount received for the job work which is the income of the applicant establishment and thus, the applicant establishment is not liable to pay the contribution of a sum of Rs.1,24,260/-.

15. The order under section 45-A of the Act dated 25.4.2003 is passed by respondent No.2 exparte. The applicant has given correct reasons as to why on 14.2.2003 he has not attended for personal hearing and on 17.4.2003 he sent a letter in which he sought 15 days time, but without giving such 15 days time, the order dated 25.4.2003 is came to be passed. Some of the courier acknowledgments are produced to show that notice at Ex.R.5 has served on the applicant, but in the meantime during the relevant period criminal case was also pending against the applicant and in Ex.R.6 clear date of receipt is also not mentioned. Thus, it is doubtful as to whether notice at Ex.R.5 is served on the applicant or not. Thus, the order passed under section 45-A of the Act is none other than without calling the applicant for personal hearing and on this aspect also this order is partly liable to set aside, but as per the own admission given by A.W.1 he is liable to pay the contribution of Rs.1,660/- towards transportation and overtime wages. Thus, for all these reasons I answer these two issues partly in the affirmative."

4. The ESI Court therefore allowed the application and

set aside the order under Section 45-A of the Act, 1948 insofar

as it related to the contribution of a sum of Rs.1,24,240/-

demanded on the job work done by the respondent

establishment.

5. Being aggrieved by the aforesaid order, the present

appeal is filed.

6. Learned counsel for the appellant submitted that if

the ESI Court was of the opinion that the respondent

establishment was not provided adequate opportunity to

represent at the personal hearing, then it must have remitted

the case back to the Corporation for reconsideration and to pass

appropriate orders. He submitted that the ESI Court could not

have mechanically allowed the application and set aside the

demand of contribution of a sum of Rs.1,24,240/-. Learned

counsel invited the attention of the Court to Ex.A23, which is the

statement of account of the respondent establishment for the

year 2000-01 and 2001-02. The learned counsel for the

respondent submitted that the ledger of labour charges did not

relate to the wages paid by the respondent but was in fact the

amounts received from third parties for the job work done.

Therefore, the same were reflected as "credits". He submitted

that these amounts comprised of various components including

profits and therefore could not be termed as omitted labour

charges.

7. Insofar as the Labour charges and wages paid during

the year 2000-01, it is found from Ex.A23 that the respondent

establishment had made sufficient contribution. However, for the

year 2002-03, the respondent establishment had expended a

sum of Rs.2,52,800/- towards labour charges contribution of

Rs.2,826/- was paid. It is for the respondent but to justify

payment of Rs.2,826/- as contribution. Further, it is for the

respondent to show the labour charges during 2001.02 and the

contribution made on it. The Tribunal while holding that the

respondent establishment was not provided enough opportunity

to represent its case, must have remitted the case back to the

ESI Corporation for determining the case of the respondent

establishment and thereafter pass appropriate orders. Not doing

so has resulted in deprival of the contribution to the ESI

Corporation, which is undoubtedly public money.

8. In that view of the matter, this appeal is

allowed-in-part. The impugned order passed by the Tribunal

insofar as it relates to setting aside the demand of contribution

of sum of Rs.1,24,240/- under Section 45-A of the Act, 1948 is

set aside. Consequently, the case is remitted back to the ESI

Corporation which shall pass appropriate orders under Section

45-A of the Act, 1948 within a period of three months from the

date of receipt of a certified copy of this judgment.

All contentions are left open.

Office is directed to return the trial Court records

immediately.

Sd/-

JUDGE

Vnp*